Health-insurance costs outpace wage gains, survey finds

Workers saw a modest rise in the average cost of employer-sponsored health insurance this year, but coverage costs still are climbing faster than wages.

Workers saw a modest rise in the average cost of employer-sponsored health insurance this year, but they're probably not overwhelmed with relief.

Coverage costs still are climbing faster than wages. That means, in many cases, that a bigger portion of the average paycheck is sliced off for insurance instead of being deposited into employee bank accounts.

Annual premiums for employer-sponsored family coverage climbed nearly 4 percent this year to top $16,000 for the first time, according to a survey by the Kaiser Family Foundation released today.

The cost of single coverage rose almost 5 percent. Those are smaller increases than the spikes of 9 percent for family coverage and 8 percent for single recorded in 2011. But this year's increases lap the average 1.8 percent rise in worker wages.

Plus, more companies are giving their employees coverage with a high deductible. Those plans require a patient to pay more out of pocket for things like blood tests or MRIs before coverage starts. Coupled with the growing cost of coverage, that means many employees are likely paying more for insurance that covers less.

While health care costs have generally grown more moderately since the Great Recession eased, the average worker still feels the pain of paying more, said Drew Altman, CEO of the nonprofit Kaiser Family Foundation, which conducts the survey on coverage costs with the Health Research and Educational Trust.

"Their costs are going up, their cost-sharing is going up, wages are flat and inflation is much lower," Altman said.

Employer-sponsored health insurance is the most common form of coverage in the United States. Employers typically cover most of the health insurance bill for their workers, but the employee's contribution is rising faster than their pay. Over the past 10 years, the average worker's contribution toward family health insurance premiums has climbed 89 percent, while wages grew 31 percent.

Those averages mean that someone who hypothetically made $50,000 in 2003 now makes $65,500. But nearly 7 percent of that worker's pay now covers the cost of health insurance when about 4.8 percent did in 2003.

The actual change a worker sees in health insurance costs can vary greatly.

Some employers absorb cost hikes for their workers. Rate changes also depend on where the employee lives, the coverage he or she has and the size of the employer. Employees of smaller companies tend to see bigger cost fluctuations in part because those businesses have less leverage for rate negotiations.

Smaller employers also are turning more to high-deductible plans to help control insurance cost growth. These plans can cost the employer less by shifting more of the expense to the employee.

More than half of companies with fewer than 200 employees offered insurance with an annual deductible of $1,000 or greater this year for single coverage, according to the Kaiser survey. That's up from 16 percent in 2006.

A total of 38 percent of all firms surveyed offered a deductible that high, up from 10 percent in 2006.

Jewelry design business Thomas Michaels Designers Inc. offers employee health insurance with a $5,000 deductible. The plan covers only four people, but co-owner Nora Michaels said the annual premium for it totals $22,000 and eats up about 20 percent of the Camden, Maine, company's budget.

Michaels said she plans to look into whether her employees can get a better deal through the health care overhaul and its upcoming coverage expansions. The federal overhaul will expand coverage next year to millions of uninsured people in part by providing income-based tax credits to help customers buy insurance through exchanges if they can't get affordable coverage through an employer.

Michaels has watched her total cost of coverage climb about $200 a year for the past several years, and she said that growth prevents her from raising pay.

"There's a lot of things we don't do because we have to pay that kind of premium," she said. "It kind of stifles business."

Kaiser's survey was conducted between January and May this year and involved results from more than 2,000 non-federal public and private firms.